Friday, March 23, 2007

Pricey summer coming

Natural gas is primarily used in North America for two things: winter heating and summer peak electrical generation. We've made it out of a warm winter, which helped keep winter demand low (presumably, this will be a chronic condition) but you can expect the summer to be hot, too. That's going to mean a spike in natural gas prices, something that's going to be aggravated by news like this:
A decline in imports of natural gas from Canada may lead to higher U.S. prices this summer, said Peter Linder, an energy analyst with DeltaOne Capital Partners in Calgary.

"We're going to have the biggest decline in western Canadian production in the history of the industry," Linder said. "There's going to be 400 to 600 million cubic feet a day less production from western Canada in 2007 versus 2006."

Linder said the combination of falling imports from Canada, the potential for production disruptions from hurricanes, and a tighter supply picture than a year ago will work to keep gas prices in the $9 to $10 per million Btu range this summer.
Now, in terms of a year-on-year decline that's not catastrophic -- percentage-wise. (About -3 or -4% on the outside.) But this comes after a decade straight of spending increases in Alberta -- the gas industry is on an accelerating treadmill of investment, getting less and less gas per $ spent.

The white knight in this scenario is coalbed methane, which the gas industry hopes will replace the shortfall in production in time to avert a catastrophe. I've got to head out for something terribly annoying, but something I'd like to find more about is the environmental issues behind CBM. Apparently, this has been an issue in BC... anyone out there know more?

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